The European Commission recently launched a consultation inviting stakeholders to share their views in relation to what qualifies as a foreign exchange (“FX”) financial instrument and what is deemed not to qualify as a FX financial instrument, with particular focus on the definition of a spot FX instrument.

The determination of the proper definition of a FX financial instrument is relevant in relation to the Markets in Financial Instruments Directive (“MiFID”), since once a contract is considered to be a financial instrument for the purposes of MiFID, then any activity in relation to that instrument may give rise to authorisation and other obligations under MiFID. Moreover, since the definition of a financial instrument in MiFID is used in a wide variety of other EU legislation, the classification of an FX contract as a financial instrument will bring such FX contracts within the ambit of other EU legislation, in particular the European Market Infrastructure Regulation and its reporting obligations.

The responses to the consultation will be used to provide guidance to the Commission when preparing a formal Commission proposal in relation to the definition of a FX contract. The deadline for comments and feedback in this respect is 9 May 2014.

A copy of the consultation paper can be found here.